Charges Expected for HealthSouth Ex-CEO

The former chief executive of HealthSouth Corp. is being indicted on charges stemming from what federal prosecutors contend was massive fraud aimed at propping up the medical-care company’s stock price, a source said.

The grand jury indictment against former CEO and Chairman Richard Scrushy will be unsealed today in Birmingham, Ala., said a federal official who spoke on condition of anonymity.

The official declined to reveal the exact nature of the charges.

Fifteen former HealthSouth employees, including five chief financial officers, already have pleaded guilty to criminal fraud charges since the Justice Department investigation began in March.

The government contends that Scrushy and HealthSouth inflated company earnings by at least $2.5 billion to make it appear the company was meeting expectations of Wall Street analysts.

Scrushy has blamed the fraud on others in the company.

Scrushy’s attorneys could not be reached for comment, but they have said repeatedly in the past that they expected him to be indicted.

A Justice Department official declined to comment on whether an indictment was imminent, and the U.S. attorney’s office in Birmingham did not immediately return telephone calls seeking comment.

HealthSouth, founded by Scrushy in 1984, is the largest U.S. provider of outpatient surgery, diagnostic imaging and rehabilitation services.

The company has some 50,000 employees and about 1,700 sites in all 50 states and overseas.

At a recent congressional hearing, several current and former HealthSouth employees said Scrushy knew about efforts to massage company accounts to meet earnings forecasts. Scrushy invoked his 5th Amendment protection against self-incrimination when he testified in October before the same House committee.

HealthSouth and Scrushy have been accused of fraud in a civil lawsuit by the Securities and Exchange Commission.